Fixed Assets & Depreciation: What Every Business Should Know

What Counts as a Fixed Asset

Fixed assets are items a business acquires to serve its operating needs for more than one year — not for resale. They are divided into tangible assets (buildings, machinery, vehicles, office equipment) and intangible assets (software, rights, multi-year expenses). Land, works of art, antiques and jewellery are excluded from depreciation, as they are not considered to wear out or become obsolete with age.

Why Depreciation Exists

The logic behind depreciation is that the cost of a fixed asset is not charged entirely to the year of purchase, but is allocated gradually over the years in which the asset is actually used and helps generate revenue. Depreciation is therefore the accounting way to “spread” the cost of an investment over its useful life, rather than burdening a single year’s results all at once.

Tax Depreciation Rates

Tax law sets specific depreciation rates per asset category, regardless of the asset’s estimated actual useful life. For assets that do not fall into a special category, the general rate for “other fixed assets” applies, which is 10% per year — meaning the asset is fully depreciated over ten years. Intangible assets, rights and multi-year expenses generally follow the same general 10% rate, unless otherwise provided for a special category.

For accelerated depreciation of productive investments, see our guide to 2026 tax reliefs and deductions.

When Depreciation Starts

Tax depreciation does not start from the invoice date, but from the month following the month in which the asset was actually put into use or service. So if a machine is bought in March but installed and starts operating in May, depreciation starts in June, calculated proportionally for the months of use within the year.

The Depreciation Deferral Option for New Businesses

New businesses may defer tax depreciation of all their fixed assets during their first three tax years of operation, starting from the year of their commencement declaration. This is an important tax planning tool: a new business expecting profits later can “shift” depreciation to years with higher taxable profit, maximising its benefit. From the fourth tax year onwards, depreciation is calculated normally for all assets, regardless of when they were acquired.

Why Depreciation Is “Mandatory” in Practice

Although the accounting decision may seem optional, tax law sets a strict framework: if depreciation is charged at a higher rate than prescribed, the excess is not recognised for tax purposes. Conversely, if no depreciation is charged or it is charged at a lower rate, the business permanently loses the right to claim in future the depreciation it should have charged and omitted. In other words, “correct” depreciation each year is not just good practice — it secures the right to deduct.

A Calculation Example

Suppose a business buys office equipment worth €12,000 in September, put into use immediately that month. Applying the general 10% annual rate, annual depreciation would be €1,200 (€12,000 × 10%). But since depreciation starts from the following month of use (October), in the first year it is calculated proportionally for only three months (October–December): €1,200 × 3/12 = €300. The full annual depreciation of €1,200 applies from the following year onwards, until the asset’s value is exhausted after ten years in total.

If the same business were newly established, it could choose to defer this depreciation entirely for its first three tax years, shifting the tax benefit to a later year with expected higher profits.